Riordan Manufacturing Financial Analysis Essay

3921 Words 16 Pages
Riordan Manufacturing, Incorporated is an industry leader in plastic injection molding. State-of-the art design capabilities allow creation of innovative plastic designs that have earned international acclaim. Attention to detail, extreme precision, and enthusiastic quality controls are the hallmarks of Riordan Manufacturing with facilities in San Jose, California, Albany, Georgia, Pontiac, Michigan, and Hangzhou, China (Apollo Group, 2005, 2006).
The slow consolidation of the operational processes of the different divisions with different non-compatible operation software has become a financial threat to Riordan Manufacturing. The current situation of the financial and accounting systems between the different divisions has required
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Examining how well a company can "turnover" its assets measures its efficiency. Shareholders can measure this with three ratios. The Accounts Receivable Turnover measures how quickly the company receives payment for its sold goods. Riordan can use those funds to generate more revenue. Accounts Receivable Turnover is 8.4. The industry standard is 7.7 (Thomas Reuters, 2010, Management Efficiency, para. 1.)
Riordan's current Accounts Payable Turnover ratio is 11.5. Last year's ratio was 10.49. The increase "means that the company is paying of suppliers at a faster rate" (Investopedia ULC, 2010, para 2) and enhances its creditworthiness. The company's current Inventory Turnover ratio is 5.3. Its previous year's ratio was 4.8. A company that reduces its Inventory Turnover indicates a positive trend because it increases the company's cash flow and reduces costs associated with poor merchandise management (Curators of the University of Missouri, 2010.)
Financial Trend for Improvement
One area of financial interest in the company's Income Statement and Balance Sheet is its high EBIT/Interest ratio. A ratio that appears too low may indicate that a company has problems repaying its interest payments. Riordan's ratio of 21.2 is very high. Riordan needs to avoid "neglecting opportunities to magnify

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